Advisory firms' dilemma: "Who owns client data?"

Data ownership is emerging as a hot topic in the financial advice industry

Feb 25, 2016 @ 9:26 am

By Alessandra Malito

Data ownership is emerging as a hot topic in the financial advice industry, as firms and advisers grapple with how to harness the right kind of data to provide more insightful financial planning.

With the promise of automated data analytics and aggregation, however, comes the nitty gritty details of who owns it, where it is stored and who has the rights to access it. Tricia Rothschild, head of global adviser and wealth management at Morningstar, is among industry leaders who are increasingly asking advisers: “Who owns the data?”

Most firms and third-party vendors seem to agree that the client does. The more important question should be who and what parties have the right to access and manage that data, industry watchers say.

And that is where the picture gets more complicated.

“Just because you own it doesn't mean you can access it anytime, anywhere,” said Lowell Putnam, chief executive of Quovo, a data analytics and aggregation provider.

Advisers use this data to better serve their clients, and the data comes from the financials of the client. At the same time, however, the data is being created on custodian and brokerage platforms, where trades and transactions are made. There are many moving parts to data ownership: not only what entity owns what part of the process, be it trading or building a financial plan, but where it is stored and how it is shared among third-party vendors.

“With that comes new questions and new decisions and challenges, and that is what the industry is grappling with,” Ms. Rothschild said.

Take for example the type of firm an adviser is working with. It makes sense that the data belongs to the adviser and client when an adviser is considered an individual contractor, as opposed to a employee, Mr. Putnam said, adding that, in all cases, the client should be the undisputed owner of the account information.

It gets particularly hazy for custodians and clearing firms, said William Boland, an analyst at Aite Group.

“Ownership is a gray area, and has become more complicated with the need for technology tools,” he said in an email. “RIAs are making these integrations — allowing accounts and holdings to be shared — and can argue it is in clients' best interest. This holds at least for the life of the relationship.”

For broker-dealers, the Broker Protocol allows departing advisers to take five pieces of information with them, including names, addresses and contact information, he said. Clients can access historical records, but former service providers are prevented from sharing that data, he said.

Omaha-based custodian TD Ameritrade tries to break down the rights and responsibilities of the data, a spokesman said, and views the process as rights to access, not data ownership. The record of a transaction would belong to the custodian, but also to the client and the adviser, who needs to keep records as well. When TD works with a third-party vendor, for tasks such as statement-printing, it is the custodian's data. But when the firm is sharing data with the adviser's chosen third-party vendor for back-office technology, it is being delivered on behalf of the adviser.

“When we do so, it is clear that the information being delivered to the service provider is the adviser's information, not ours,” Joseph Giannone, the spokesman, said in an email.

That data is also portable should an adviser leave, and an adviser's copy of the data is the adviser's to keep, he added.


A spokesman at LPL said the Boston-based broker-dealer's privacy policy outlines situations in which advisers are able to retain client data should they leave to go to another broker-dealer.

Morningstar allows importing and exporting the data, and is working with third-party vendors through integrations to improve access to client data.

“We are working on initiatives with the kind of support concept where people should have choice where their data resides, and promote an open ecosystem,” Ms. Rothschild said.

Kevin Knull, president of financial planning software provider MoneyGuidePro, said his company does not work directly with clients and honors the requests of the firms it works with. He agreed the data should be the client's.

Not only is it complicated declaring ownership — he said some may argue a financial plan belongs to an adviser because of intellectual property in creating it — but in some cases, there is a challenge in moving the data from one system to another. Standard uniformity wouldn't work either, though, because it could stunt innovation.

eMoney, a financial planning software provider, handles data two ways: the first is with individual contract owners, where the software provider will make advisers' data portable when they are leaving one firm for another. When eMoney has an enterprise contract, there is typically language about the ownership of the data, which determines how much of it an adviser can take with him or her.

“The adviser typically has to go get authorization from the firm, which relays that to us,” said Matt Schulte, senior vice president of financial planning at eMoney. “We get something in writing and that allows us to move the data for them.”


Mr. Schulte noted that clients have a portal to upload documents and data, which they can deem private or share with advisers. The firm may dictate how data is moved with permission, but anything the client provides is at the discretion of the client.

Wealth Access, a data analytics and aggregation provider that helps advisers build a real-time balance sheet, said the company honors how to set up the software, but the data that flows through it is based on clients granting permission.

“We all know investors get better advice if their advisers understand who they are, what their objectives are, their goals, tolerance for risk,” he said. “That is a part of this data story.”

Mr. Putnam said the industry's answer to rights to data may come in the form of a client-driven process. Quovo and other data aggregators use credentials shared by the client, so the owner of the data is the one making requests or managing retribution. Wealth Access is also permissions-based.

“We see that in the future as being a way that accounts can be shared with an adviser in cases when the adviser's ownership isn't 100% clear,” he said. “It means the client is in charge of access to data, which is a trend that we want to see continue.”


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